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EXHIBIT 10.7
UNIVERSAL AUTOMOTIVE INDUSTRIES, INC.
SUPPLY AGREEMENT
DATED AS OF
AUGUST 28, 2001
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TABLE OF CONTENTS
Page
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Section 1. Definitions.....................................................1
Section 2. Sale of Products................................................2
Section 3. Minimum Purchase Obligation.....................................2
3.1 Minimum Annual Purchases........................................2
3.2 Purchase Orders.................................................2
3.3 Determination of Price..........................................3
3.4 Acceptance of Orders............................................3
3.5 Failure to Obtain Minimum Purchase Obligation...................3
Section 4. Right of First Refusal..........................................3
4.1 Supply Offer....................................................4
4.2 Supply Acceptance Notice........................................4
4.3 Third-Party Suppliers...........................................4
4.4 Certain Limitations.............................................4
4.5 Audit Right.....................................................5
Section 5. Additional Terms................................................5
5.1 Delivery........................................................5
5.2 Partial Orders..................................................5
5.3 Payment.........................................................5
5.4 Prices..........................................................5
Section 6. Term and Termination............................................5
6.1 Term............................................................5
6.2 Termination by the Supplier.....................................5
6.3 Termination by the Company......................................5
Section 7. Force Majeure...................................................6
Section 8. Miscellaneous...................................................6
8.1 Remedies........................................................6
8.2 Consent to Amendments; Waiver...................................6
8.3 Survival........................................................6
8.4 Successors and Assigns..........................................7
8.5 Severability....................................................7
8.6 Counterparts....................................................7
8.7 Descriptive Headings............................................7
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8.8 Notices.........................................................7
8.9 Confidentiality.................................................8
8.10 No Third-Party Beneficiaries....................................8
8.11 No Partnership or Joint Venture.................................8
8.12 Entire Agreement................................................8
8.13 Construction....................................................8
8.14 Incorporation of Exhibits and Schedules.........................8
8.15 Governing Law...................................................8
8.16 Submission to Jurisdiction......................................8
8.17 Attorneys' Fees.................................................9
8.18 Visitation......................................................9
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SUPPLY AGREEMENT
This SUPPLY AGREEMENT ("Agreement") dated as of August 28, 2001, is
made by and between Universal Automotive Industries, Inc., a Delaware
corporation ("Company"), and Wanxiang America Corporation, a Kentucky
corporation ("Supplier").
The parties hereto agree as follows:
Section 1. Definitions. For the purposes of this Agreement, the
following terms have the meanings set forth below:
"Affiliate" of any particular Person means any other Person
controlling, controlled by, or under common control with, such Person, any
partner of such Person, and any partner of a Person that is a partnership. For
purposes of this definition, "control" shall mean the ownership, direct or
indirect, of 10% or more of the securities of a Person that shall entitle the
holder thereof to vote in the general election of directors.
"Agreement" has the meaning set forth in the preamble.
"Closing" has the meaning set forth in the Purchase Agreement.
"Common Stock" means the common stock, par value $0.01 per share, of
the Company.
"Company" has the meaning set forth in the preamble.
"Confidential Information" means all oral and written confidential and
proprietary information (in tangible, intangible, or other form) concerning the
Supplier, and its past, present, and future business, affairs, operations,
management, stockholders, affiliates, officers, and directors. Confidential
Information shall not include any information that: (i) is or becomes publicly
known other than as a result of a breach of an obligation of confidentiality by
the disclosing Person; (ii) is disclosed to a Person by a third party entitled
to make such disclosure; and (iii) a Person can demonstrate was already known to
it prior to receipt from the disclosing Person.
"Material Adverse Effect" means an effect that is materially adverse to
the business, operations, prospects, or financial condition of the Company.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, and a governmental entity or any
department, agency, or political subdivision thereof.
"Preferred Stock" means the Series A Preferred Stock, $0.01 par value
per share, of the Company.
"Products" means: (i) any and all brake parts, brake rotors, brake
drums, non-asbestos disc brake pads and relined brake shoes and brake linings,
and hydraulic parts currently or hereafter manufactured, distributed, supplied,
or sold by the Supplier or one or more of its Affiliates; (ii) any and all other
automotive parts, supplies, products, equipment, and materials,
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currently or hereafter manufactured, distributed, supplied, or sold by the
Supplier or one or more of its Affiliates; (iii) any and all automotive parts,
supplies, products, and materials that the Supplier or one or more of its
Affiliates could (whether as of the date of this Agreement or at any time
thereafter), without a material capital expenditure, manufacture, distribute,
supply, or sell; and (iv) any and all services related to any of the foregoing
that the Supplier or one or more of its Affiliates could (whether as of the date
of this Agreement or at any time thereafter) render.
"Purchase Agreement" means that certain Purchase Agreement, of even
date herewith, by and between the Company and the Supplier.
"Supplier" has the meaning set forth in the preamble.
"Territory" means the Peoples Republic of China and all of its
provinces, territories, territorial waters, and inland seas.
"Third-Party Supplier" means any manufacturer, distributor, supplier,
seller, or any other provider of Products located within the Territory or any
Person who acquires for resale any Products manufactured within the Territory.
"Underlying Common Stock" has the meaning set forth in the Purchase
Agreement.
Section 2. Sale of Products. The Parties agree that the Supplier
will sell and the Company will purchase Products as provided in this Agreement,
and that the terms and conditions of this Agreement shall apply to all such
sales and purchases unless the Supplier and the Company agree otherwise in
writing.
Section 3. Minimum Purchase Obligation.
3.1 Minimum Annual Purchases. During each 365-day period beginning
on the date that is 90 days following the date of this Agreement (each, a
"Contract Year"), the Company shall be obligated to purchase from the Supplier,
Products in amounts at least equal to US $5,000,000 ("Minimum Purchase
Obligation") on the terms and conditions set forth in this Section 3. The
Minimum Purchase Obligation shall be calculated based on Products actually
shipped and Products scheduled for shipment during each Contract Year assuming a
60-day production lead-time. In the event that this Agreement is terminated for
any reason before the last day of any Contract Year, the Minimum Purchase
Obligation shall be reduced proportionately as of such date.
3.2 Purchase Orders. The Company shall indicate its intent to
purchase the Products under its Minimum Purchase Obligation by delivering to the
Supplier a written purchase order ("Purchase Order"). Each Purchase Order shall
comply with the Supplier's standard requirements for the ordering of Products,
and otherwise shall identify: (i) the type and quantity of each Product that the
Company desires to purchase; (ii) the price for each Product (determined in
accordance with Section 3.3); (iii) the quality of each Product; (iv) the
Company's desired delivery date for each type of Product; and (v) all other
material terms of purchase.
3.3 Determination of Price. The price for Products to be purchased
from the Supplier by the Company to satisfy the Minimum Purchase Obligation
shall be comparable to the price
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that the Company could obtain for comparable type, quantity, and quality of
Products from comparable suppliers in the Territory. In the event of any
disagreement between the Supplier and the Company concerning the pricing of
Products, the Company shall furnish to the Supplier bona fide written offers
from at least three comparable suppliers in the Territory (each of whom shall
not be an Affiliate of the Company) to sell Products of the type, quantity, and
quality that the Company intends to purchase from the Supplier. In the event
that the Supplier shall accept the Company's Purchase Order, the Supplier shall
agree to sell the Products subject to the Purchase Order at a price no greater
than four percent (4%) higher than the lowest of the comparable prices of the
Products set forth in the offers from such comparable suppliers in the
Territory. This section shall not apply to any purchases of Products that exceed
the Minimum Purchase Obligation.
3.4 Acceptance of Orders. All orders for Products received by the
Supplier pursuant to this Section 3 shall be subject to acceptance by the
Supplier at the Supplier's sole and absolute discretion. As soon as practicable,
but in no event later than five (5) business days following receipt by Supplier
of the Purchase Order, Supplier shall notify the Company of its acceptance or
rejection of such Purchase Order. Any such acceptance by the Supplier shall be
on terms that are comparable to the material terms contained in the Purchase
Order. In the event that the Supplier shall reject the Company's Purchase Order
because the Supplier shall not agree to sell the Products on terms that are
comparable with the material terms that are contained in the Purchase Order,
then for purposes of determining the Minimum Purchase Obligation in any Contract
Year, the value of the Products covered by such rejected Purchase Order shall
count toward the calculation of the aggregate amount of purchases made by the
Company in such Contract Year.
3.5 Failure to Obtain Minimum Purchase Obligation. In the event
that, on the last day of any Contract Year, the cumulative payments actually
made by the Company to the Supplier for such Contract Year are less than the
Minimum Purchase Obligation for such Contract Year, the Supplier shall, within
45 days thereafter, invoice the Company for an amount of money equal to: (i) US
$5,000,000; less (ii) the aggregate amount of purchases made by the Company
determined in accordance with Section 3.1 and Section 3.4 in such Contract Year
("Payment Deficiency"). The Company shall pay to the Supplier an amount equal to
twenty percent (20%) of the Payment Deficiency within 10 days of its receipt of
such invoice therefor.
Section 4. Right of First Refusal. Subject to the provisions of
Section 4.4, in the event that, at any time and from time to time, the Company
desires to purchase or obtain any Products from a Third-Party Supplier, the
Company shall grant to the Supplier a right of first refusal to supply such
Products to the Company in accordance with the terms and conditions of this
Agreement ("Right of First Refusal").
4.1 Supply Offer. In the event that the Company shall at any time
intend to purchase or otherwise acquire Products from any Third-Party Supplier,
the Company shall indicate its intent to so purchase or otherwise acquire
Products by delivering to the Supplier a written notice thereof ("Supply
Notice"). Each Supply Notice shall comply with the Supplier's standard
requirements for the ordering of Products, and otherwise shall identify: (i) the
type and quantity of each Product that the Company desires to purchase; (ii) the
price for each Product; (iii) the quality of each Product; (iv) the Company's
desired delivery date for each type of Product; and (v) all other material terms
of purchase (collectively, "Supply Terms").
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4.2 Supply Acceptance Notice. All orders for Products received by
the Supplier pursuant to the Supply Notice shall be subject to acceptance by the
Supplier at the Supplier's sole and absolute discretion. As soon as practicable,
but in no event later than five (5) business days following receipt by Supplier
of the Supply Notice, Supplier shall notify the Company of its acceptance or
rejection of such Supply Notice (each such written notice of acceptance, a
"Supply Acceptance Notice").
4.3 Third-Party Suppliers. In the event that the Supplier rejects
the Supply Notice, the Company shall have the right to purchase or otherwise
acquire the Products identified in the Supply Notice from a Third-Party
Supplier; provided, however, that the terms of such purchase or acquisition
shall be on identical terms contained in the Supply Notice (including, without
limitation, type and quantity of each Product, and the price and quality for
each Product). In the event that the terms and conditions offered to, or agreed
upon with, the Third-Party Supplier ("Third Party Terms") are not identical to
the terms and conditions contained in the Supply Notice, the Company shall not
be entitled to consummate any such purchase or acquisition with a Third-Party
Supplier unless and until the Company shall have issued a new Supply Notice to
the Supplier containing the Third Party Terms, and Supplier shall have an
additional period of twenty (20) business days following receipt by Supplier of
the Supply Notice containing the Third Party Terms within which to elect to
exercise its right of first refusal as set forth in this Agreement, and shall do
so by delivering a notice to such effect to the Company. Only in the event that
the Supplier rejects the Supply Notice containing the Third Party Terms shall
the Company be entitled to consummate any such purchase or other acquisition of
Products with a Third-Party Supplier.
4.4 Certain Limitations. Notwithstanding the anything to the
contrary in this Agreement: (a) during the first Contract Year, not less than
50% of the total Products purchased or otherwise acquired by the Company from
Third-Party Suppliers shall be subject to the Right of First Refusal; (b) during
the second Contract Year, not less than 65% of the total Products purchased or
otherwise acquired by the Company from Third-Party Suppliers shall be subject to
the Right of First Refusal; and (c) during the third Contract Year and
thereafter, not less than 80% of the Products purchased or otherwise acquired by
the Company from Third-Party Suppliers shall be subject to the Right of First
Refusal.
4.5 Audit Right. To verify the compliance by the Company with
Section 4, the Company will permit the Supplier (at its sole expense) and each
of its attorneys, accountants, and representatives, upon reasonable notice and
during normal business hours, to: (a) visit and inspect any of the properties of
the Company; (b) examine the corporate and financial records of the Company and
make copies thereof or extracts therefrom for proper corporate purposes; and (c)
discuss the affairs, finances, and accounts of the Company with the directors,
officers, key employees, and independent accountants of the Company. No later
than 30 days following the end of each Contract Year, the Chief Financial
Officer of the Company shall certify in writing to the Supplier the value of all
Products purchased or otherwise acquired by the Company from Third-Party
Suppliers during the prior Contract Year and all other information reasonably
requested by the Supplier.
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Section 5. Additional Terms. Unless otherwise agreed in writing
by the Company and the Supplier, the terms and conditions of this Section 5
shall apply to all sales of Products pursuant to this Agreement.
5.1 Delivery. All deliveries shall be F.O.B. Company's warehouse
in Chicago, Illinois or as otherwise designated to the Supplier from time to
time.
5.2 Partial Orders. In the event the Supplier is unable to fill in
whole any order for Products as set forth in the Purchase Order or the Supply
Notice, respectively, the Supplier shall fill such order in part, and the
Company shall pay to the Supplier the pro-rata price for the Products, to be
sold by the Supplier; provided that the Supplier shall have received the consent
of the Company, which shall not be unreasonably withheld, delayed, or
conditioned.
5.3 Payment. The Company shall make full payment for each shipment
of Products, no later than sixty (60) days following the date of delivery of
such Products to the Company's warehouse. All payments shall be made in U.S.
Dollars in immediately available funds.
5.4 Prices. All prices shall be denominated in U.S. Dollars.
Section 6. Term and Termination.
6.1 Term. Subject to the terms and conditions hereof, this
Agreement shall become effective as of the date hereof and shall continue in
perpetuity.
6.2 Termination by the Supplier. Supplier shall have the right to
terminate this Agreement at any time upon written notice to the Company.
6.3 Termination by the Company. The Company may terminate this
Agreement upon written notice to the Supplier delivered not less than sixty (60)
days prior to the effective date of said termination and accompanied by payment
of all undisputed invoices then-outstanding only in the event that:
(a) the Supplier has materially failed to perform any of
its material obligations specified herein in connection with its sale
of Products to the Company, and such default remains uncured for sixty
(60) days following the delivery of a written notice from the Company
specifying, in reasonable detail, such failure(s) and the methods for
remedying any such failure.
(b) Venture Equities Management, Inc. (together with its
Affiliates) owns, directly or indirectly, a number of shares of
Underlying Common Stock that is less than fifty percent (50%) of the
number of shares of Underlying Common Stock owned by Venture Equities
Management, Inc. immediately following the Closing.
Section 7. Force Majeure. Neither party shall be liable to the
other party for failure or delay in performance under this Agreement to the
extent that such failure or delay arises from force majeure (defined below). As
soon as practicable following the occurrence of force majeure, the party whose
performance is thereby delayed or prevented shall promptly give notice to the
other party of such occurrence and the anticipated effect thereof. Force Majeure
shall be
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defined to include, any act of God, act of war, war conditions, civil commotion,
strikes, lockouts, embargo, equipment failure, unavailability of raw materials
or other shortage of resources necessary for the production of Products,
accidents, epidemics, political unrest, a material change in applicable
legislation or interpretation thereof, or any other cause, occurrence, or
condition beyond such party's reasonable control.
Section 8. Miscellaneous.
8.1 Remedies. Each party will have all rights and remedies set
forth in this Agreement and all of the rights that such party has under any law.
Any Person having any rights under any provision of this Agreement will be
entitled to enforce such rights specifically, without posting a bond or other
security, to recover damages by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law. Notwithstanding
anything to the contrary herein, in the event of any default or breach
hereunder, the non-defaulting party shall be required to notify the defaulting
party within 120 days of the date on which the non-defaulting party's directors,
executive officers, or employees with principal responsibility for the
administration of this Agreement shall have actual knowledge of such default or
breach.
8.2 Consent to Amendments; Waiver. Except as otherwise expressly
provided herein, the provisions of this Agreement may be amended only by a
written instrument signed by the Company and the Supplier. No other course of
dealing between the Company and the Supplier or any delay in exercising any
rights hereunder will operate as a waiver of any rights of the Supplier.
8.3 Survival. All representations, warranties, and covenants
contained herein or made in writing by, or on behalf of, the parties in this
Agreement or connection herewith will survive the execution and delivery of this
Agreement. Without limiting the generality of the foregoing, Section 4 of this
Agreement shall survive the termination of this Agreement by any party for any
reason.
8.4 Successors and Assigns. The Supplier may assign this Agreement
and delegate its duties hereunder to one or more of its Affiliates. The Company
may not assign any of its rights nor delegate any of its duties hereunder
without the prior written consent of the other party. Except as otherwise
expressly provided herein, all covenants and agreements contained in this
Agreement by, or on behalf of, any of the parties hereto will bind and inure to
the benefit of the respective successors and assigns of the parties hereto
irrespective of whether so expressed.
8.5 Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by, or invalid under, applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
8.6 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together will constitute
one and the same Agreement.
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8.7 Descriptive Headings. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
8.8 Notices. Any notice, request, instruction, or other document
to be given hereunder shall be in writing and shall be deemed to have been
given: (a) two days after receipt, if given by courier; (b) upon receipt, if
given in person; (c) on the date of transmission, if sent by telex, facsimile,
or other wire transmission; or (d) five days after being deposited in the mail,
certified or registered mail, postage prepaid, as follows:
If to the Company:
Universal Automotive Industries, Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
If to the Supplier:
Wanxiang America Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇-▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Pin Ni
Facsmile: ▇▇▇-▇▇▇-▇▇▇▇
or to such other address or to the attention of such other Person as the
recipient party has specified by prior written notice to the sending party.
8.9 Confidentiality. The Company acknowledges that it has had
access, and will continue to have access, to Confidential Information, and in
connection therewith, hereby covenants and agrees that, from and after the date
hereof: (a) it will not make use, for its own benefit or for the benefit of any
Person other than the Supplier, of any Confidential Information; (b) will hold
in a fiduciary capacity for the benefit of the supplier all Confidential
Information; and (c) will not communicate or divulge any Confidential
Information to any Person, other than to such of the Supplier's employees and
agents for the purpose of promoting the business and affairs of the Supplier or
as may be required by law, statute, rule, or regulation (in which case the
disclosing party will, prior to any such disclosure, furnish a notice thereof to
the Person whose Confidential Information is to be disclosed).
8.10 No Third-Party Beneficiaries. This Agreement will not confer
any rights or remedies upon any Person other than the Company, the Suppliers,
and their respective successors and permitted assigns.
8.11 No Partnership or Joint Venture. Nothing contained in this
Agreement shall be deemed to create a partnership, joint venture, agency,
association, or syndicate between the Supplier and the Company nor make the
parties affiliates of one another.
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8.12 Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the parties and
supersedes all prior understandings, agreements, arrangements, or
representations by or among the parties, written or oral, that may have related
in any way to the subject matter hereof.
8.13 Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rule of strict construction will be applied against any party. Any
reference to any federal, state, local, or foreign statute or law, statute,
rule, or regulation will be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The use of the
words "including" means "including without limitation." All references to
sections, exhibits, and schedules are to sections, exhibits, and schedules to
this Agreement. All words used in this Agreement shall be construed to be of
such gender or number as the circumstances require.
8.14 Incorporation of Exhibits and Schedules. The exhibits
identified in this Agreement are incorporated herein by reference and made a
part hereof.
8.15 Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the substantive laws of the State of
Illinois, without regard to the conflicts of laws principles thereof.
8.16 Submission to Jurisdiction. Each of the parties to this
Agreement submits to the jurisdiction of any state or federal court sitting in
Chicago, Illinois in any action or proceeding arising out of, or relating to,
this Agreement, agrees that all claims in respect of the action or proceeding
may be heard and determined in any such court, and agrees not to bring any
action or proceeding arising out of or relating to this Agreement in any other
court. Each of the parties to this Agreement waives any defense of inconvenient
forum to the maintenance of any action or proceeding so brought and waives any
bond, surety, or other security that might be required of any other party with
respect thereto.
8.17 Attorneys' Fees. In the event of any action, arbitration, or
suit based upon or arising out of any actual or alleged breach by any party of
any representation, warranty, covenant, or agreement in this Agreement, the
prevailing party shall be entitled to recover its reasonable attorneys' fees and
expenses of such action, arbitration, or suit from the other party, in addition
to any other relief ordered by any proper arbitration proceeding or court.
8.18 Visitation. Upon the reasonable request of the Company, the
Supplier shall use reasonable efforts to arrange for visits by the Company and
its customers to the entities that supply the Products to the Supplier.
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IN WITNESS WHEREOF, the parties hereto have executed this Supply
Agreement as of the date first written above.
UNIVERSAL AUTOMOTIVE INDUSTRIES, INC.
By:
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Its:
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WANXIANG AMERICA CORPORATION
By:
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Its:
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