Exclusive Supply and Sole Source Agreement - Intelligent Systems for Retail Inc. and Diamond Phoenix Corp.
EXCLUSIVE SUPPLY AND SOLE SOURCE AGREEMENT
This Exclusive Supply and Sole Source Agreement (the "Agreement"),
entered into as of the Effective Date (the "Effective Date"), is by and between
Intelligent Systems for Retail, Inc. ("ISR"), a California corporation with
offices at 1241 E. Hillsdale Boulevard, Suite 210, Foster City, California
94404, and Diamond Phoenix Corporation ("Diamond "), a Maine corporation with
offices at 167 River Road, Lewiston, Maine 04241.
RECITALS
WHEREAS, ISR is in the business of soliciting direct consumer sales via
the Internet and then selling and delivering grocery, drugstore, and general
merchandise products to general consumers;
WHEREAS, Diamond is in the business of designing, manufacturing,
integrating and installing equipment for automated materials handling, including
Carousel Products;
WHEREAS, the parties desire that Diamond manufacture and sell to ISR
various types of Carousel Products for automated materials handling;
WHEREAS, the parties desire that ISR purchase all of its requirements
for these Carousel Products from Diamond Phoenix; and
WHEREAS, the parties by this Agreement desire to set forth their
various rights and responsibilities regarding the sale and purchase of such
Carousel Products.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto agree as follows:
AGREEMENT
1.0 DEFINITIONS.
1.1 "Affiliate" shall mean (i) a corporation performing activities relating to
ISR's business in which ISR owns and controls, directly or indirectly, at least
fifty percent (50%) of the outstanding shares entitled to vote for the board of
directors; (ii) a franchisee or licensee of ISR; or (iii) a joint venture with a
third party (x) which joint venture performs activities relating to ISR's
business, and (y) in which ISR owns or controls at least twenty percent (20%)
equity interest.
1.2 "Carousel Product" shall mean Diamond's carousel product for automated
materials handling, as more fully described in Exhibit A, including all
equipment and related Carousel Software. The parties agree that, from time to
time and subject to mutual agreement, the parties may amend or add different
configurations of carousel
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products to this list. When used without capitalization, the term "carousel
products" shall refer to carousel products generally and not just those
manufactured by Diamond.
1.3 "Carousel Software" shall mean that certain software, in source code and
object code format, which (1) controls the functionality of the Carousel Product
or (2) interfaces with other materials handling systems.
1.4 "Intellectual Property" shall mean all rights of a person or entity in, to,
or arising out of: (i) any U.S. or foreign patent (or any similar right) or any
application therefor and any and all reissues, divisions, continuations,
renewals, extensions and continuations-in part thereof; (ii) inventions (whether
patentable or not in any country), invention disclosures, improvements, trade
secrets, proprietary information, know-how, technology and technical data; (iii)
copyrights and registrations and applications therefor in the U.S. or any
foreign country, and all other rights corresponding thereto throughout the
world; and (iv) any other proprietary rights anywhere in the world.
1.5 "Shareholder Agreement" shall mean that certain Amended and Restated
Shareholder Agreement of even date herewith.
1.6 "Specifications" means the specifications for the Carousel Product, as set
forth in Exhibit A.
1.7 "Purchase Order" means a written order from ISR (or any of its Affiliates)
delivered to Diamond requesting Diamond to manufacture and sell a Carousel
Product and stating the proposed unit numbers and specifications of the Carousel
Product, the location at which the Carousel Product will be installed (the
"Worksite") and any special conditions thereof that might affect the
fabrication, installation or testing of the Carousel Product, shipping
instructions, any request for Diamond to supply labor for installation, a
requested testing schedule and procedure, and the requested delivery date. The
Purchase Order may also include a reference to a "Technical Proposal" sent by
Diamond to ISR, including such information as price, scope of work, system
functionality, delivery schedule, and acceptance test criteria.
2.0 MANUFACTURING AND SALES.
2.1 Manufacturing and Sale.
(a) Manufacturing and Sale. Upon ISR's (as used in this Section 2.0
only, ISR shall also refer to ISR's designated Affiliate(s)) Purchase Orders
therefor and pursuant to the terms and conditions of this Agreement, Diamond
agrees to manufacture and sell all Carousel Products ordered by ISR to ISR or
its designated Affiliates, and, subject to Section 2.1(c), ISR agrees to
purchase such Carousel Products from Diamond.
(b) Diamond Exclusivity. Provided that ISR fulfills its obligations
pursuant to Section 4 or unless ISR provides prior written consent, Diamond
shall not sell any Carousel Products (whether sold by Diamond or sold by a
licensee, distributor, integrator, broker or any other third
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party authorized by Diamond) to any other entity in the business of soliciting
and transacting direct consumer sales via the Internet and delivering (whether
using its own transportation or via outsourcing to a third party) grocery,
drugstore, and general merchandise to customers.
(c) ISR Exclusivity and Sole Source. For so long as Diamond
manufactures and sells to ISR its required supply of carousel products, ISR
agrees to purchase all of its requirements for carousel products from Diamond.
If Diamond fails to provide ISR with all its required supply of Carousel
Products ordered pursuant to this Agreement on any particular Purchase Order for
a given site on the delivery dates reasonably required by ISR, such failure
shall not be considered a breach of this Agreement but will entitle to ISR to
purchase enough equivalent products from a third party to fulfill such
particular Purchase Order. The foregoing notwithstanding, subject to ISR's
fulfilling its obligations set forth in Section 4 of this Agreement, Diamond's
obligations pursuant to Section 2.1(b) shall remain in full force and effect.
2.2 Orders and Forecasts.
(a) All purchases and sales between ISR (and any of its Affiliates) and
Diamond, whether consummated directly or indirectly through a third party agent
of Diamond, shall be initiated by ISR's issuance of written Purchase Orders sent
via airmail or by telephone or facsimile and then confirmed by written Purchase
Orders. The acceptance by Diamond of a Purchase Order shall be indicated by
written acknowledgment thereof by Diamond. In the event of a conflict between
the terms and conditions of any Purchase Order and the terms and conditions of
this Agreement, the terms and conditions of this Agreement shall control as to
such conflict, unless the parties agree in writing that the terms and conditions
of a particular Purchase Order shall supersede a particular term or condition of
this Agreement.
(b) ISR shall have the right to cancel Purchase Order(s) or any
portions thereof for any reason by notifying Diamond in writing no later than
thirty (30) days after ISR submits its Purchase Order(s) pursuant to Section
2.2(a). Cancellation shall be effective upon Diamond's receipt of the written
cancellation notice from ISR. Diamond shall cease all work on such canceled
purchase order(s) in accordance with the cancellation notice. In the event that
Diamond incurs any costs in connection with preparing for or commencing work on
a Purchase Order that is canceled pursuant to this provision, including without
limitation costs for materials, drawings or labor, ISR shall reimburse Diamond
for such reasonable costs within thirty (30) days of receiving an invoice
therefor.
2.3 Delivery and Shipping. Diamond shall ship the Carousel Products to ISR's
Worksite suitably packaged for shipment in Diamond's standard containers. All
shipping costs shall be prepaid by Diamond but invoiced to ISR.
2.4 Insurance and Risk of Loss. Immediately following delivery of the Carousel
Product to the Worksite, ISR shall be responsible for and shall bear any and all
risk of loss of or damage to the Carousel Product. ISR shall, at its expense,
take out and maintain insurance in an amount at least equal to the Purchase
Price covering all risks of loss or damage to the Carousel Product. Such
insurance shall name Diamond as an insured party and shall provide for an
insurer's waiver of
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subrogation in favor of all insured parties. Prior to delivery of the Carousel
Product to the Worksite, Diamond shall be responsible for and shall bear any and
all risk of loss of or damage to the Carousel Product. Diamond, at its expense,
shall maintain insurance in an amount equal to or greater than the value of all
Carousel Products that Diamond is manufacturing for or shipping to ISR, such
insurance to cover all risks of loss or damage to the Carousel Products.
2.5 Site Conditions and Provisions by Purchaser. ISR, at its own expense, shall
provide at the Worksite reasonable means of access to a minimum of one dock
door, with the availability of a dock leveler, a completely enclosed building to
protect Diamond's equipment from the elements, completion of water-tight roof
and such electric current, water, heat, ventilation, telephone service, a
temporary office space, light and other utilities and facilities required for
the installation of the Carousel Product. In the event that any elevator or
crane service owned by ISR shall be available at the Worksite, Diamond may,
without charge, use any such service for handling of materials during
installation. ISR shall allow Diamond access to the Worksite for inspection of
compliance to these requirements, prior to commencement of the installation.
Additional provisions and conditions related to Worksite conditions and
installation may be attached to the Purchase Order and acceptance thereof.
2.6 Permits. Prior to the installation of the Carousel Product, ISR shall
procure and pay for all building, erection and other licenses, permits,
authorizations and inspections required in connection with the Carousel Product.
Diamond shall not be responsible for any failure of the Carousel Product or its
installation to comply with building, electrical or other codes or regulations
of local, state or federal agencies or authorities.
2.7 Changes, Delays. At any time prior to delivery, ISR may request in writing
any substitutions, deviations, additions, or deletions (hereinafter referred to
as "Changes") in the Carousel Product and in the specifications or drawings
incorporated in this Agreement or the Purchase Order. All of the terms and
conditions of this Agreement shall apply to such Changes. If Diamond's
performance is delayed by any such Changes or by other causes within control of
ISR, ISR agrees to reimburse Diamond for reasonable and documented expenses
incurred as a result of such delay, including without limitation, the costs of
storing, maintaining, repairing, and refurbishing Carousel Product, demurrage,
labor and material escalation and pull out charges. Upon request by ISR, Diamond
shall provide to ISR an itemized list of all such expenses with supporting
documentation. In such event, ISR also agrees to excuse the delay and accept
Diamond's performance at any appropriately deferred completion date.
2.8 Labor and Personnel. Any request that Diamond supply labor at the Worksite
(other than Diamond's customary installation supervisor) shall be set forth in
the Purchase Order and the cost of such labor, including any premium for
overtime, shall be negotiated for each order.
2.9 Test and Inspection By ISR.
(a) All Carousel Products manufactured and delivered by Diamond may be
subject to incoming receiving inspection by ISR at the Worksite.
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(b) Within five (5) days of delivery of the Carousel Product to the
Worksite, ISR shall inspect the Carousel Product for damage incurred during
shipping and conformity to the Purchase Order. If ISR determines that the order
it has received does not conform to the Purchase Order, or is damaged during
shipment, ISR shall notify Diamond in writing within ten days of the date of
delivery of the Carousel Product to the Worksite and Diamond shall at its own
expense repair or replace such Carousel Product.
(c) Each Purchase Order and acceptance thereof shall state the
procedure and schedule for testing of the Carousel Product.
3.0 CAROUSEL SOFTWARE.
3.1 Carousel Software. Diamond shall own all right, title and interest in and to
the Carousel Software, including any Intellectual Property rights therein.
3.2 License Grant. Diamond grants to ISR (and its designated Affiliate(s) as
applicable) a nonexclusive, worldwide, perpetual, irrevocable, royalty-free,
fully paid up license to use, display and publicly perform the Carousel Software
in connection with the operation of the Carousel Products; and, for purposes of
executing the Carousel Software, analysis, and running simulations by ISR and
Affiliate(s) only, to copy the Carousel Software. Without limiting the
foregoing, ISR may grant to its designated Affiliate(s) to which it has sold,
leased or otherwise transferred a Carousel Product or which has purchased a
carousel Product directly from Diamond (or any third party agent of Diamond) a
sublicense in and to its rights in the Carousel Software co-extensive with the
rights granted hereunder by Diamond to ISR.
3.3 Ownership of Modifications. As between ISR and Diamond, subject to and with
exception of Diamond's ownership of the Carousel Software as set forth in
section 3.1, ISR shall own all right, title, and interest in and to any
permitted modifications and derivative works made from or to the Carousel
Software on behalf of ISR, including all Intellectual Property rights therein.
ISR grants Diamond a nonexclusive, worldwide, perpetual, irrevocable,
royalty-free, fully paid up license to use and copy any such modifications and
to sub-license any such modifications and derivative works to any licensee other
than a business described in section 2.1(b). Nothing in this section 3.3 should
be construed to allow ISR to modify or make derivative works from the Carousel
Software without the express written consent of Diamond.
3.4. Software Escrow.
3.4.1. Escrow Account.
(a) On the Effective Date, and as a condition precedent to any
obligation of ISR hereunder, Diamond will deposit a copy of all materials
relating to the Carousel Software, including the binary and source code for the
Carousel Software, and all tools used by Diamond to generate such software that
are not generally commercially available, such as Diamond-authored development
tools, etc., such that a reasonably skilled programmer could understand and
modify such Carousel Software (collectively, the "Source Materials") in escrow
with a mutually
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acceptable escrow agent and the parties will enter into a mutually acceptable
source code escrow agreement on customary terms consistent with the provisions
of this Section 3.5. Diamond will deposit all Source Materials with the escrow
agent in accordance with the escrow agreement, but in no event shall such
deposits occur less frequently than once per calendar quarter. ISR shall have
the right to inspect any deposited Source Materials after delivery to the escrow
agent, but only on the premises of the escrow agent and only as necessary to
verify the nature and completeness of such Source Materials. ISR shall pay the
fees of the escrow agent.
(b) In the event that Diamond ceases to carry on business for thirty
(30) consecutive days, fails or is otherwise unable to provide service and
support which it is contractually obligated to provide for the Carousel
Software, which inability continues for thirty (30) days after ISR notifies
Diamond in writing of the alleged failure in service and support, the deposited
Source Materials shall be delivered to ISR by the escrow agent. Delivery of the
deposited materials will be made to ISR after written request by ISR to the
escrow agent, stating the grounds upon which the request is made. On receipt of
the request from ISR, the escrow agent will mail a copy of the request to
Diamond and will then deliver the deposited Source Materials to ISR forthwith
thirty (30) days after the copy of the request is mailed to Diamond. If Diamond
disputes the occurrence of any default event specified in ISR's request, the
escrow agent will not deliver the requested Source Materials to either party
until directed to do so by ISR and Diamond jointly, or until ordered to do so by
final order of a court of competent jurisdiction or pursuant to an arbitration
proceeding initiated by either of the parties, in accordance with the
then-current rules of the American Arbitration Association. If ISR initiates the
arbitration, it shall be with an arbitrator located in the State of Maine. If
Diamond initiates such arbitration, it shall be with an arbitrator located in
the State of California. If a party initiates such arbitration, the other party
agrees to submit to the jurisdiction thereof, solely for the purpose of
adjudicating release pursuant to this Section 3.4 and to cooperate fully to
complete such proceeding as quickly as possible. The decision of the arbitrator
will be binding and either party will have the right to enter such order in a
court of competent jurisdiction.
3.4.2. Use of Source Materials.
(a) On the occurrence of receipt by ISR of the Source Materials, ISR
may use the Source Materials, either directly or indirectly, through a third
party programmer or analyst engaged by ISR specifically to complete or continue
Diamond's work, solely to modify, enhance, and support the Carousel Product, and
to make a reasonable number of copies of the Source Materials to assist in the
performance of such tasks;
(b) ISR acknowledges and agrees that the Source Materials constitute
confidential proprietary information of Diamond. ISR may disclose the Source
Materials only to those employees of ISR (or Affiliates) required to have
knowledge of such information to perform their duties. ISR shall protect the
Source Materials with the same degree of care as it protects its own
confidential information, and in no event less than a reasonable degree of care.
(c) If a problem that resulted in ISR obtaining the Source Materials is
later cured, ISR shall promptly return the Source Materials to escrow agent.
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4.0 ISR PERFORMANCE CRITERIA.
4.1 Minimum Order. In order to maintain the exclusivity granted in Section
2.1(b) and the effect of the Standstill Period as defined in the Stock Purchase
Agreement and the Shareholder Agreement, ISR (including all orders from its
Affiliate(s)) shall annually order at least the following amounts of Carousel
Products from Diamond:
(a) From January 1, 1999, through March 31, 2000, ISR shall place
cumulative orders of Carousel Products in an amount of Ten Million Dollars
($10,000,000.00);
(b) From January 1, 1999, through December 31, 2000, ISR shall place
cumulative orders of Carousel Products in an amount of Twenty-two Million Five
Hundred Thousand Dollars ($22,500,000.00); and
(c) From January 1, 1999, through December 31, 2001, ISR shall place
cumulative orders of Carousel Products in an amount of Thirty-five Million
Dollars ($35,000,000.00).
4.2 In the event that ISR fails to order the minimum amounts of Carousel
Products set forth above, but such orders nonetheless total at least
seventy-five percent (75%) of such minimum amounts, such failure shall not be
considered a breach of this Agreement but ISR may only maintain the exclusivity
in 2. 1 (b) and the Standstill Period by placing additional orders to meet the
minimum amounts within the first quarter of the following year.
4.3 In the event that IRS fails to order the minimum number of Carousel Products
set forth above and does not correct any such shortcoming pursuant to section
4.2, such failure shall not be deemed a breach of this Agreement but shall allow
Diamond to terminate the Standstill Period and the restriction that Diamond
limit certain sales to ISR exclusively as set forth in section 2.1(b).
4.4 For the purpose of determining whether ISR has placed sufficient orders to
meet the performance criteria set forth in this section, an "order" shall be
defined to include all of the following:
(a) The receipt by Diamond of a written Purchase Order from ISR:
(b) The receipt by ISR of Diamond's written acceptance of the Purchase
Order;
(c) The receipt by Diamond of ISR's deposit of ten percent (10%) of the
purchase price; and
(d) The receipt by Diamond on a continuing basis of all payments
invoiced with respect to a particular order in a timely manner.
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For the purposes of this section 4, an order placed by ISR or an Affiliate
directly or indirectly through an authorized agent, licensee, distributor,
integrator or broker of Diamond's shall be considered an order by ISR from
Diamond.
5.0 TECHNICAL SUPPORT.
Within one hundred and twenty (120) days of the Effective Date, the
parties shall negotiate and enter into a Separate Support Agreement, pursuant to
which Diamond would provide technical support to ISR regarding use of the
Carousel Products.
6.0 PRICE AND PAYMENT.
6.1 Price. ISR (as used in this Section 6.0 only, ISR shall also refer to ISR's
Affiliate) will pay to Diamond for Carousel Products as follows:
(a) ISR will pay to Diamond (whether sold by Diamond or sold by a
licensee, distributor, integrator, broker or any other third party authorized by
Diamond) for Carousel Products based on the price list and pricing methodology
set forth in Exhibit B. During the Term (but not extending through any renewal
term), Diamond shall not increase the prices charged to ISR for Carousel
Products by more than two-thirds (2/3) of the increase in the Consumer Price
Index ("CPI") over the twelve month period prior to any such increase. As used
herein, CPI means the U.S. Consumer Price Index for all Urban Consumers, U.S.
City Average - All Items 1982-1984 = 100 Base for the applicable twelve (12)
month period as published by the Bureau of Labor Statistics. The price for
Carousel Products sold during any renewal term is set forth in section 7.2.
(b) During the term of this Agreement and any extensions thereof,
Diamond shall provide ISR with a volume discount on Carousel Products ordered,
and such discount shall be set equal as follows:
(i) If during any one (1) calendar year period, ISR places
orders for Carousel Products in an aggregate sum of between Five
Million Dollars ($5,000,000.00) and Ten Million Dollars ($
10,000,000.00), Diamond shall reduce the price, retroactively or
prospectively, as the case may be, of Carousel Products ordered during
the entire calendar year by six percent (6%).
(ii) If during any one (1) calendar year period, ISR places
orders for Carousel Products in an aggregate sum of more than Ten
Million Dollars ($ 10,000,000.00) but less than Twenty Million Dollars
($20,000,000.00), Diamond shall reduce the price, retroactively or
prospectively, as the case may be, of Carousel Products ordered during
the entire calendar year by eight and one-half percent (8.5%).
(iii) If during any one (1) calendar year period, ISR places
orders for Carousel Products in an aggregate sum of more than Twenty
Million Dollars
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($20,000,000.00), Diamond shall reduce the price, retroactively or
prospectively, as the case may be, of Carousel Products ordered during
the entire calendar year by ten percent (10%).
(iv) For the purpose of determining whether ISR has placed
sufficient orders to qualify for the discounts set forth in this
section and determining whether a particular order is made during a
calendar year when a discount has been earned, the definition of
"order" set forth in Section 4.4. shall apply.
(c) During each Extension Period (as defined in section 7.2 below)
elected by ISR, Diamond may increase the price charged ISR for the Carousel
Product by one hundred percent (100%) of the increase in the CPI during the
twelve month period prior to any such increase.
6.2 Payment Method.
(a) ISR shall pay Diamond for all Carousel Products ordered by ISR as
follows. Within ten (10) days of Diamond's acceptance of an ISR Purchase Order,
ISR shall pay to Diamond a deposit equal to ten percent (10%) of the Purchase
Price. Diamond shall invoice ISR on the first and fifteenth days of each month
thereafter for progress payments for the cost of materials, fabrication,
installation and other services. Each invoice shall be paid by ISR within
fifteen (15) days of receipt. Ten percent (10%) of the Purchase Price shall be
held by ISR as a retainer, to be paid within fifteen (15) days after the
completion of the installation of the Carousel Product and the completion of the
Scope of Work set forth in the Purchase Order.
(b) In addition to the Purchase Price, ISR shall pay all shipping
costs, taxes (including without limitation, state, federal, local sales or value
added taxes and personal property taxes), import or export duties, and business
license fees. Any of the foregoing for which Diamond has a legal obligation of
payment may be invoiced by Diamond to ISR for payment within fifteen (15) days
unless ISR furnishes Diamond with the applicable tax exemption certificate or
direct payment certificate. ISR hereby indemnifies and holds Diamond harmless
from and against any claims by any third party for payment of any of the
foregoing taxes or fees.
7.0 TERM AND TERMINATION.
7.1 Term of this Agreement. This Agreement shall become effective on the
Effective Date and shall continue in force until December 31, 2001 (such period,
the "Term") unless terminated earlier pursuant to Section 7.3.
7.2 Renewal Option. After the Term and through December 31, 2005, ISR shall have
the option, in its sole discretion, to extend the Term for successive one (1)
year periods (each such period an "Extension Period") based on the following
option price formula and according to the following procedure:
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ISR shall exercise its option to extend the Term for one year by giving
Diamond written notice no later than thirty (30) days following the end of the
Term or extension thereof. The price paid by ISR to Diamond for exercising any
renewal option shall be as follows:
(a) If during the immediately preceding calendar year, ISR (including
all orders from its Affiliates) places an order in an aggregate amount of more
than Ten Million Dollars ($10,000,000.00), ISR may exercise the option without
any charge.
(b) If during the immediately preceding calendar year, ISR (including
all orders from its Affiliates) places an order in an aggregate amount of less
than Ten Million Dollars ($10,000,000.00), ISR may exercise the option at a cost
of fifteen percent (15 %) of the difference between the actual annual orders
placed and Ten Million Dollars ($10,000,000.00).
(c) For the purpose of determining whether an order has been placed
during a particular calendar year, "order" shall be defined as in Section 4.4
hereof.
7.3 Termination. This Agreement may be terminated only in accordance with the
following:
(a) Either party hereto may terminate this Agreement for cause if the
other party hereto becomes the subject of a voluntary or involuntary petition in
bankruptcy or any proceeding relating to insolvency, receivership, liquidation,
or composition for the benefit of creditors, which petition or proceeding is not
dismissed with prejudice within sixty (60) days after filing.
(b) Either party hereto may terminate this Agreement for cause if the
other party breaches any express material term or condition of this Agreement
and fails to cure that breach within sixty (60) days after receiving written
notice of the breach. If the nature of the cure for any non-monetary breach is
such that it is reasonably expected to take longer than sixty (60) days, the
breaching party shall be given an additional forty-five (45) calendar days to
cure such breach, provided the cure is commenced during the original sixty (60)
day period and is diligently carried out thereafter. In the event the material
breach is not cured within the periods specified above after delivery of the
notice, the non-breaching party may terminate this Agreement in writing as of a
date specified in the termination notice. The terminating party shall have all
rights and remedies available at law or equity as well as any other rights and
remedies set forth in this Agreement.
7.4 Survival. The provisions of Sections 3.0 (Ownership and License Grant), 5.0
(Technical Support), 7.4 (Survival), 8.0 (Warranties and Indemnification), and
9.0 (Confidentiality), 10.0 (Jurisdiction and Applicable Law), and 11.0
(Miscellaneous) shall survive termination of this Agreement for any reason.
8.0 WARRANTIES AND INDEMNIFICATION.
8.1 Warranties. Diamond represents and warrants as follows:
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(a) That it owns the technology incorporated into or embodied by the
Carousel Product sold to ISR (or its Affiliate) hereunder and that it has full
legal right to sell the Carousel Product and that it has satisfied any and all
applicable conditions precedent to such sale and that the sale by it of the
Carousel Product hereunder does not violate any obligations to third parties to
which it is bound.
(b) That it has full power to enter into this Agreement, to carry out
its respective obligations pursuant to this Agreement, and to grant the rights
granted pursuant to this Agreement. Further, Diamond represents and warrants
that it has obtained all corporate, third party, and governmental approvals
necessary to enter into this Agreement and carry out the transaction
contemplated thereby.
(c) That it is not engaged in nor has it been notified of any potential
claims, suits, actions, investigations, or proceedings relating to any
Intellectual Property rights concerning the Carousel Product. Diamond will
immediately give written notice to ISR of any such event known to it during the
term of this Agreement.
(d) Diamond warrants that (a) the Carousel Product shall be free from
all liens, charges or encumbrances, except any lien of Diamond in respect of any
unpaid portion of the Purchase Price; (b) the Carousel Product shall be free
from defects in material and workmanship and shall conform to the specifications
of the Carousel Product set forth in Exhibit A and also conform to the
functionality defined in the agreed to Technical Proposal attached to the
Purchase Order, if any; and (c) the Carousel Product shall be new and, in the
absence of specification of a nature consistent with Diamond's usual and normal
production. Diamond shall, at its option, repair or replace (at Diamond's
expense) any defective Carousel Product or component thereof, provided however,
that Diamond is given written notice of any defect during the warranty period.
For this purpose the warranty period shall commence on the earlier of the date
of first commercial use or the date on which Diamond tendered the Carousel
Product for commercial use, and the warranty period shall end one year after
such commencement date. When the installation and commissioning of equipment is
not the responsibility of Diamond Phoenix, the date of effective commercial use
shall be thirty (30) days after shipment, unless otherwise specified in writing.
ISR shall give Diamond prompt written notice of any claim under the
foregoing Warranty and permit Diamond to inspect the Carousel Product in order
to verify the defect or nonconformity. Failure of ISR to give Diamond such
notice and opportunity to inspect shall relieve Diamond of all obligations with
respect to such claims.
Subject to Diamond's obligations under section 8.2 of this Agreement,
ISR's remedies and Diamond's obligations in connection with any claim made under
this warranty shall be limited to repair or, at Diamond's option, replacement of
the equipment or part thereof which is found to be defective. Labor performed at
the Worksite with regard to such claims is not included in this warranty. ISR
shall be responsible for the normal maintenance and repair of the Carousel
Product and shall perform the same in accordance with generally accepted
maintenance procedures or such other procedures as are set forth in maintenance
and repair manuals provided by Diamond to ISR.
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Diamond shall not be responsible for and shall not be obligated to pay or to
reimburse Purchaser for (a) any work or repairs performed on the Carousel
Product by third parties except for mutually agreed subcontractors, (b) any
materials furnished by third parties for use in connection with the Carousel
Product if the same was undertaken or furnished without mutual prior written
consent or (c) any loss or damage arising from improper operation or maintenance
of the Equipment or from ordinary wear and tear.
Notwithstanding other provisions of this Article, in instances of a
"major failure" during the warranty period. Diamond will provide all necessary
parts and installation labor to correct the defect. A "major failure" is defined
as failure of the Carousel Product or portion of the Carousel Product, to
operate as described in the Technical Proposal, which ISR, through the diligent
efforts of its maintenance personnel or available contractors, cannot remedy.
Diamond will immediately dispatch a serviceman by commercial air carrier upon
request and notification of a "major failure" by ISR.
Should it later be reasonably determined by Diamond that the necessary
corrective services were within the capabilities of the ISR's maintenance
personnel, ISR will reimburse Diamond for the labor and expenses of the service
trip.
This warranty applies only to products that are manufactured by Diamond
and ISR's sole warranty with respect to items not manufactured by Diamond
(including without limitation the computers that control the Carousel Product)
shall be that of the manufacturer, if any.
THERE ARE NO WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED
TO ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OTHER
THAN AS SPECIFICALLY SET FORTH ABOVE.
8.2 Indemnity by Diamond. Diamond agrees to indemnify and hold ISR and its
Affiliates harmless from any and all loss, cost, liability, or expense
(including court costs and reasonable fees of attorneys and other professionals)
arising out of or resulting from the breach or claimed breach of the above
warranties and representations, including but not limited to any such loss,
cost, liability, or expense arising out of or resulting from any claim brought
by a third party against ISR, including any claims that the Carousel Product
infringe the Intellectual Property rights of any third party. In the event of
any such claim, ISR (or its Affiliate) agrees to notify Diamond promptly of the
claim and to permit Diamond, at Diamond's expense, to assume control of the
defense thereof with counsel of Diamond's choosing, and cooperate with Diamond
in such defense at Diamond's expense.
8.3 ISR's Representations, Warranties, and Covenants.
(a) ISR represents and warrants that it has full power to enter into
this Agreement and to carry out its respective obligations pursuant to this
Agreement. ISR also represents and warrants
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that it has obtained all corporate, third party, and governmental approvals
necessary to enter into this Agreement and carry out the transaction
contemplated thereby.
(b) ISR covenants that it shall not modify the Carousel Product or the
Carousel Software nor create derivative works based on the Carousel Software in
any way without the express written consent of Diamond.
8.4 Indemnity by ISR. ISR agrees to indemnify and hold Diamond harmless from any
and all loss, cost, liability, or expense (including court costs and reasonable
fees of attorneys and other professionals) arising out of or resulting from the
breach or claimed breach of the above warranties and representations, including
but not limited to any such loss, cost, liability, or expense arising out of or
resulting from any claim brought by a third party against Diamond. In the event
of any such claim, Diamond agrees to notify ISR promptly of the claim and to
permit ISR at ISR's expense, to assume control of the defense thereof with
counsel of ISR's choosing, and cooperate with ISR in such defense at ISR's
expense.
9.0 CONFIDENTIAL INFORMATION.
9.1 "Confidential Information" means any information disclosed by one party to
the other party in connection with this Agreement and which the disclosing party
believes to include confidential information, is designated with an appropriate
legend such as "CONFIDENTIAL:" (or other label indicating its confidential
status) at the time of disclosure if in documentary or other tangible form, or
if such disclosure is initially oral or visual and not reduced to written or
documentary form at the time of disclosure, such Confidential Information shall
be identified as confidential at the time of disclosure, summarized or
identified in a written document that is marked with an appropriate legend
indicating its confidential status, and provided to the other party within
twenty (20) days following such oral or visual disclosure. For each item of
Confidential Information, the party disclosing the item shall be called the
"Disclosing Party," and the party receiving the item shall be called the
"Receiving Party."
9.2 Confidentiality Obligations. The Receiving Party shall hold all Confidential
Information of the Disclosing Party in trust and confidence, and protect it as
the Receiving Party would protect its own confidential information (which shall
in any event shall be no less than reasonable protection) and shall not use such
Confidential Information for any purpose other than that contemplated by this
Agreement. Unless agreed by the Disclosing Party in writing, the Receiving Party
shall not disclose any Confidential Information of the Disclosing Party, by
publication or otherwise, to any person other than employees and contractors
(such as contract manufacturers or software developers) bound to written
confidentiality obligations consistent with and at least as stringent as those
set forth herein and who have a need to know such Confidential Information for
purposes of enabling a party hereto to exercise its rights and perform its
obligations pursuant to this Agreement.
9.3 Exceptions. The obligations specified above shall not apply to any
Confidential Information to the extent that (a) it is already known to the
Receiving Party without restriction prior to the time of disclosure pursuant to
this Agreement; (b) it is acquired by the Receiving
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Party from a third party without confidentiality restriction and does not
originate with the Disclosing Party; (c) it is independently developed or
acquired by the Receiving Party by employees or contractors without access to
such Confidential Information; (d) it is approved for release by written
authorization of the Disclosing Party; (e) it is in the public domain at the
time it is disclosed or subsequently falls within the public domain through no
wrongful action of the Receiving Party; or (f) it is furnished to a third party
by the Disclosing Party without a similar restriction on the third party's
right.
9.4 Compelled Disclosure. A Receiving Party may disclose Confidential
Information if it is disclosed pursuant to the requirement of a court or other
governmental agency or disclosure is permitted or required by operation of law,
provided that the Receiving Party use its best efforts to notify the Disclosing
Party in advance and seeks confidential treatment for such Confidential
Information.
9.5 Return of Confidential Information. Upon written request of the Disclosing
Party, the Receiving Party shall return to the Disclosing Party any Confidential
Information in its possession or shall certify in writing as to its destruction.
In any event, upon termination of this Agreement for any reason, the Receiving
Party shall promptly return all Confidential Information to the Disclosing
Party.
9.6 Confidentiality of Agreement. Each party agrees that the terms and
conditions of this Agreement shall be treated as Confidential Information;
provided that each party may disclose the terms and conditions of this
Agreement: (i) as required by any court or other governmental body or as
otherwise required by law; (ii) to legal counsel; (iii) in confidence, to
accountants, banks, and financing sources and their advisors; and (iv) in
confidence, in connection with the enforcement of this Agreement or rights under
this Agreement.
10.0 JURISDICTION, APPLICABLE LAW, AND DISPUTE RESOLUTION.
10.1 Governing Law and Venue. This Agreement and any matters hereunder shall be
governed by and construed in accordance with the internal laws of the State of
Maine, excluding its conflict of law rules. The parties hereto hereby consent to
the exclusive jurisdiction and venue of the state and federal courts of Maine
and California with respect to the resolution of any suit, action or proceeding
hereunder; provided, however, that only the defendant in any such suit, action
or proceeding shall have the right to select the venue as between the states of
Maine or California with respect to any such suit, action or proceeding. In any
such suit, action or proceeding, the non-prevailing party shall pay to the
prevailing party all reasonable attorneys' and expenses incurred by the
prevailing party in such suit, action or proceeding. For purposes of the
immediately preceding sentence, "attorneys' fees" shall include, without
limitation: fees for services relating to the claim or dispute rendered prior to
litigation (including investigation); at both trial and appellate levels; after
judgment in seeking to obtain any execution or enforcement thereof; and in
connection with any bankruptcy or similar proceeding.
10.2 Dispute Resolution. The parties agree to adopt the following procedures
with respect to the resolution of any disputes or controversies which may arise
during the term of this Agreement:
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In the event that one party believes that the other party has failed to
perform any of its obligations under this Agreement, such party's
nominated representative shall promptly so notify the other party's
nominated representative in writing and request a performance review
meeting. The nominated representatives or their designated
representatives will discuss the problem and negotiate in good faith in
an effort to resolve the dispute without any formal proceeding. No
litigation for the resolution of such disputes may be commenced until
the designated representatives have met and either party has concluded
in good faith that amicable resolution through continued negotiation
does not appear possible.
11.0 MISCELLANEOUS.
11.1 Independent Contractors. Each party acknowledges that the relationship
between the parties pursuant to this Agreement is that of independent
contractors. No provision of this Agreement shall be construed to (i) constitute
the parties as partners, joint venturers or participants in a joint undertaking,
or (ii) give any party the power to direct and control the day-to-day activities
of the other. Further, no employees of any party shall be deemed or treated as
employees of another party, and each party shall be solely responsible for any
and all payroll, employment and related taxes, and withholding applicable to its
own employees.
11.2 Waiver. Any waiver of breach or default pursuant to this Agreement shall
not be a waiver of any other subsequent default. Failure or delay by either
party to enforce any term or condition of this Agreement shall not constitute a
waiver of such term or condition.
11.3 Conflicts in Provisions. In the event of any apparent conflicts or
inconsistencies between this Agreement and any Exhibits hereto, to the extent
possible such provisions shall be interpreted so as to make them consistent, and
if such is not possible, the provisions of this Agreement shall prevail.
11.4 Headings. The Section headings herein are for reference and convenience
only and shall not enter into the interpretation hereof.
11.5 Severability. To the extent than any provision of this Agreement is found
by a court of competent jurisdiction to be invalid or unenforceable, that
provision notwithstanding, the remaining provisions of this Agreement shall
remain in full force and effect and such invalid or unenforceable provision
shall be deleted.
11.6 No Assignment. Neither Diamond nor ISR shall assign this Agreement
(including without limitation by operation of law such as by merger, change of
control, stock or asset sale or stock swap) or assign, transfer, or sublicense
any right arising hereunder without the prior written consent of the other. Any
assignment permitted hereunder shall be subject to the written consent of the
assignee to all the terms and provisions of this Agreement. This provision shall
not be construed to prevent the assignment of this Agreement or any rights
hereunder to a secured lender
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as collateral for a loan or to prevent the use by either party of independent
contractors in the ordinary course of business.
11.7 Authority. Each party warrants to the other party that it has the authority
to enter into this Agreement and that all necessary corporate or other approvals
have been or will be obtained.
11.8 Notices. Any notice required or permitted pursuant to this Agreement shall
be in writing delivered by hand, overnight courier, telecopy, facsimile, or
certified or registered mail to the address first set forth above and shall be
effective upon receipt
11.9 Amendment. No alternation, waiver, cancellation, or any other change or
modification in any term or condition of this Agreement, or any agreement
contemplated to be negotiated or reached pursuant to the terms of this
Agreement, shall be valid or binding on either party unless made in writing and
signed by duly authorized representatives of both parties.
11.10 Approvals and Similar Actions. Wherever agreement, approval, acceptance,
consent or similar action by either party hereto is required by any provision of
this Agreement, such action shall not be unreasonably delayed or withheld.
11.11 Force Majeure. In the event of any condition or contingency, existing or
future, which is beyond the reasonable control and without the fault or
negligence of either party ("Event of Force Majeure") which prevents or delays,
or materially increases the cost of, the performance under this Agreement, each
party shall be entitled to an appropriate and reasonable extension of time for
performance and an equitable adjustment of the Purchase Price. Events of Force
Majeure shall include, without limitation, Acts of God, fire, floods, transport
delays, labor disputes, and interference by military or civil authorities. If an
Event of Force Majeure occurs, the party whose performance is affected shall
take reasonable measures to mitigate and minimize the effect of such Event and
to continue with the performance of its obligations under this Agreement.
11.12 Limitation of Liability. Notwithstanding any other provision of this
Agreement including Section 8.3, Diamond shall not be liable to ISR or anyone
claiming through ISR for any special, incidental, indirect or consequential
damages of any kind whatsoever, whether such damages arise from the use,
inability to use, failure of, defects in, the conditions of, delay in delivery
of, or nondelivery of, the Carousel Product or otherwise.
11.13 Entire Agreement. The terms and conditions herein contained constitute the
entire agreement between the parties with respect to the subject matter of this
Agreement and supersede any previous agreements and understandings, whether oral
or written, between the parties hereto with respect to the subject matter
hereof; except as stated in this Agreement, there are no other agreements,
understandings, representations, or promises between the parties with respect to
the subject matter of this Agreements.
11.14 Construction. This Agreement is the result of negotiation between the
parties and their respective counsel. This Agreement will be interpreted fairly
in accordance with its terms and
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conditions and without any strict construction in favor of either party. Any
ambiguity shall not be interpreted against the drafting party.
11.15 Counterparts. This Agreement may be executed in one or more counterparts,
each of which will be deemed an original, but all of which taken together will
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized representatives as of the Effective
Date.
Intelligent Systems for Retail, Inc. Diamond Phoenix Corporation
By: /s/ Louis H. Borders By: /s/ Thomas F. Coyne
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Name: Louis H. Borders Name: Thomas F. Coyne
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Title: President Title: CEO
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Date: Nov. 24, 1998 Date: 11-24-98
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