EXHIBIT 10.18
PRODUCT SUPPORT AGREEMENT
BETWEEN
VAC SERVICE CORP. AND NEW TECH CORPORATION
AGREEMENT made this _____ day of October 1996 between VAC SERVICE CORP.
(hereinafter referred to as "VAC"), a New York corporation with its principal
offices at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ and NEW M-TECH
CORPORATION, with its principal offices at ▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇ (hereinafter referred to as "NEWTECH").
R E C I T A L S
VAC is an administrator of the manufacturer's, distributor's and
dealer's warranty programs. NEWTECH desires to retain the services of VAC to
assist in the administration of any warranty product claims, as well as out of
warranty assistance to consumers who purchase NEWTECH products and is desirous
of entering into an arrangement whereby VAC will provide certain warranty
service advice and assistance and out of warranty product assistance on behalf
of NEWTECH.
NOW, THEREFORE, it is agreed between the parties as follows:
1. PURPOSE OF AGREEMENT. This agreement is intended to define certain
obligations to be assumed by VAC for the consideration hereinafter set forth
with regard to NEWTECH's products. It is the intent of this agreement to have
VAC set up a national network of servicers to service and repair NEWTECH
products in and out of warranty; to establish and recommend service rates for
NEWTECH products and negotiate these rates with VAC
approved service centers; provide product assistance to customers; provide
consumer affairs services on behalf of NEWTECH and to provide technical support
for VAC authorized service centers.
2. ESTABLISHMENT OF A NATIONAL SERVICE NETWORK FOR REPAIR OF NEWTECH
PRODUCTS. VAC agrees to establish and maintain a national network of service
centers to service and repair NEWTECH products which are subject to this
agreement. VAC shall also research and recommend service rates for NEWTECH
products. After VAC has performed its research, it shall communicate its
recommended service rates to NEWTECH, and upon approval, VAC will negotiate
these rates with VAC approved service centers. Additionally, VAC shall provide a
T-1 800 number, which will be dedicated to NEWTECH'S needs pursuant to this
agreement. VAC shall also develop and establish scripts, training and customized
programming for loading of data files in order to establish the reports
hereinafter contemplated. For this initial set-up service as described in this
clause, NEWTECH agrees to pay to VAC, upon the execution of this agreement, the
sum of TWO THOUSAND AND 00/100 ($2,000.00) DOLLARS as a one-time charge. Upon
completion of the establishment of the program set forth in this paragraph, any
updates will be performed by VAC at no additional charge.
3. SPECIFIC SERVICES TO BE RENDERED BY VAC. At NEWTECH's specific
instance and request, VAC hereby agrees to assume the following customer service
responsibilities with regard to product support for NEWTECH products covered by
this agreement. Those products that are covered by this agreement are set forth
in
2
Schedule "A" annexed hereto and made a part hereof. Such call center services
shall be designated as options, and those options shall be defined as follows:
(a) OPTION 1--PRODUCT WARRANTY CALLS FOR PRODUCT PURCHASED WITHIN
NINETY (90) DAYS FROM K-MART OR OTHER RETAIL OUTLETS AS
DESIGNATED BY NEWTECH.
(b) OPTION 2--WARRANTY SERVICE CALLS FOR PRODUCTS PURCHASED MORE THAN
NINETY (90) DAYS FROM THE DATE OF PURCHASE.
(c) OPTION 3--CALLS FOR PART ORDERS.
(d) OPTION 4--CUSTOMER PRODUCT ASSISTANCE. A VAC employee will
provide live service for basic troubleshooting and product
assistance to the customer.
(e) OPTION 5--CONSUMER AFFAIRS. VAC will handle consumer affairs
calls and complaints concerning products. VAC will respond to
complaints or issues raised by customers in writing by stock
letters to be provided by NEWTECH for VAC to send to customers.
Scripting for Options 1 through 5 will be reviewed and approved by
NEWTECH.
In addition to the five options available, to product consumers, VAC
will also establish a technical support line for servicers that call for
technical information. In order to fulfill its obligation, NEWTECH shall supply
VAC with those technical manuals necessary in order to adequately respond to
servicers. It shall be NEWTECH's responsibility to update these manuals as
needed.
3
4. VAC ESTABLISHED CALL RESPONSE ROUTINE. VAC shall establish an
automatic call response system to answer consumer inquiries at the 800 number to
be established for NEWTECH pursuant to this agreement. The initial response on
the automated call service shall state: "Thank you for calling White
Westinghouse Service". Thereafter, the response system shall direct the caller
to press 1 for VCR service; 2 for TV service; 3 for car stereo service and 4 for
audio equipment. Thereafter, the automated call system shall direct the customer
to the five options set forth in the preceding paragraph and upon selection of
one of the defined options, VAC shall supply a live operator to respond directly
to the caller and respond to the caller's needs as required in Option 4 and 5.
5. PRICING AND CHARGES FOR VAC SERVICES.
(a) VAC agrees to set up the automated voice response system with
client options as set forth in the preceding paragraph. In order to establish
said system, NEWTECH will pay to VAC a one-time set-up fee upon the execution of
this agreement in the sum of ONE THOUSAND FIVE HUNDRED and 00/100 ($1,500.00)
DOLLARS.
(b) Each call received by VAC shall generate a specific fee depending
upon the option used by the consumer. Accordingly, each call received by VAC
shall be billed to NEWTECH pursuant to the following schedule:
(i) Option 1--$.30 per call
(ii) Option 2--$.35 per call
(iii) Option 3--$.30 per call
4
(iv) Option 4--$2.45 per call
(v) Option 5--$2.75 per call
All costs as quoted are complete, including the 800 number telephone
charge expense.
Additionally, NEWTECH shall provide the necessary letters, envelopes
and postage for VAC's use in processing Option (v). If VAC advances the postage
costs, said costs shall be reimbursed to VAC by NEWTECH as part of the monthly
billing hereinafter provided.
(c) In addition to the five options set forth above, VAC will provide
technical support service to its staff for VAC authorized service centers.
Technical support calls from servicers shall be billed to NEWTECH at the rate of
$3.00 per call.
6. PROCESSING OF WARRANTY CLAIMS. VAC shall provide and facilitate the
repair of in warranty products through its authorized service center network to
be established in accordance with ss.2 above. It is understood and agreed that
all service costs and charges are to be borne solely by NEWTECH, but paid
through a repair account to be established on behalf of NEWTECH. The purpose of
this account shall be to provide funds in order to pay service centers for
repairs made on in warranty products. With respect to any out of warranty
products serviced, VAC's sole responsibility shall be to provide the customer
with the nearest available service center or regional service center, and the
customer shall be responsible to negotiate and pay for any out of warranty
repair service directly to the service center. VAC agrees that it will set up a
bank account as a depository for payment of in warranty
5
and administrative services to be performed by VAC authorized service centers
for repairing in warranty products. Said account shall be in the nature of a
trust account and shall be segregated from VAC's general funds. This account
shall be used to pay for administrative service provided by VAC in accordance
with ss.3 and service repairs on in warranty products which are serviced by VAC
authorized service centers. NEWTECH agrees to fund this special account with an
initial deposit of $5,000.00. At the commencement of this agreement, VAC shall
have the right to make reasonable requests for additions to this fund by NEWTECH
based upon reasonable projections concerning the expenditures to be incurred
over a thirty (30) day period. In no event shall the fund initially fall below
$1,000.00. When the fund falls to a level of $2,000.00, VAC shall notify NEWTECH
to replenish the fund to the original amount of $5,000.00. Additionally, each
warranty claim for in warranty products shall generate a fee of $2.75 per
warranty claim payable to VAC. The services to be provided by VAC will include
issuance of referrals for service; receipt of claims; insurance of their
accuracy; approval of claims; issuance of payments to servicers on VAC stock
checks (drawing on advance deposits made by NEWTECH) and forwarding of monthly
summaries of completed service claims paid on their behalf. VAC will also
include, as part of this summary report, the actual documentation for each
claim. VAC will also provide NEWTECH with the terms and conditions of the
services to be rendered (Schedule A) when the model numbers are provided to VAC
by NEWTECH.
6
7. INVOICING AND PAYMENT OF FEES. Those fees that are not payable in
advance pursuant to the preceding paragraph shall be invoiced on or about the
first day of each month by VAC to NEWTECH. The invoicing shall be in the form
and content sufficient for NEWTECH to determine the calculated amount to be paid
in accordance with the monthly invoice. The invoiced amount shall be paid to VAC
within thirty (30) days from the date of invoice. Any invoices not paid within
thirty (30) days from the date of issuance shall carry a service charge of one
and one-half (l l/2%) per cent per month, which service charge shall accumulate
for each thirty (30) day cycle after the first thirty (30) day net invoice
payment is due. In the event any invoice rendered by VAC to NEWTECH is not paid
within forty-five (45) days from the date of its issuance and receipt by
NEWTECH, VAC shall have the right, upon 15 days written notice as hereinafter
provided, to suspend the service set forth in this agreement until such time as
payment is made. If NEWTECH disputes a portion of any ▇▇▇▇, any such dispute
shall be transmitted to VAC with sufficient explanation for VAC to understand
the nature of the claimed dispute by NEWTECH. The parties shall then mutually
work together to try to resolve such disputed billing, but any portion of the
▇▇▇▇ that is undisputed shall be paid by NEWTECH pending resolution of the
disputed portion. For the purposes of suspension of services, any unresolved,
legitimately disputed portion of any invoice and the lack of payment of the
amount in such dispute shall not constitute grounds for suspension by VAC of the
services contemplated by this
7
agreement.
8. GOOD FAITH ABSOLUTION OF DISPUTES. In the event any of the
operational provisions contained in this agreement concerning VAC's services and
NEWTECH's obligations to VAC for payment of services become a subject of this
agreement between the parties, the parties agree that each shall use their best
efforts to resolve such good faith disputes. Each party shall appoint one senior
management person to participate in resolution of disputes concerning payment
and operational issues as contemplated pursuant to this agreement. NEWTECH
hereby designates ▇▇▇▇▇▇ ▇▇▇▇▇ and VAC hereby designates ▇▇▇▇▇ ▇▇▇▇▇▇ as the
persons who shall be responsible for negotiating good faith disputes concerning
payment and operational issues. Any issues that are incapable of being resolved
on an operational level between the parties shall be referred to the persons set
forth in this paragraph. Notification of a dispute to be discussed shall be sent
by telefax, regular mail or overnight mail between the parties who shall
endeavor to arrange for discussions to resolve the issues as quickly as
possible. If either party shall change the designated person for this dispute
resolution mechanism, the party making the change shall notify the other by
telefax, regular mail or overnight mail of such change. Any disputes not capable
of being resolved in this manner or any other issues that may arise concerning
the interpretation of this agreement shall thereafter be subject to and
interpreted under the laws of the State of New York and the parties hereby
designate Supreme Court of Orange County as the venue of any legal action
8
commenced pursuant to this agreement.
9. MANAGEMENT REPORTS. As part of VAC's service to NEWTECH, VAC shall
generate the following management reports based upon the selection of services
that NEWTECH chooses:
(a) PRODUCT SUPPORT SUMMARY. This report will indicate by SKU,
significant customer inquiries of problems related to NEWTECH's
products. The data will be provided to NEWTECH based upon a
troubleshooting grid to be provided by NEWTECH. Frequency of reports
will range from daily (EDI) to monthly, depending upon NEWTECH's
requirements.
(b) ADDITIONAL REPORTS. Additional reports may require software
programming. If NEWTECH requests the production of additional
reports, which require development or modification of software, the
cost will be billed at SIXTY FIVE AND 00/100 ($65.00) DOLLARS per
man hour.
10. INDEMNIFICATION AND NOTICE OF SUIT.
(a) VAC shall indemnify and save harmless NEWTECH and its employees and
assigns from any and all lawsuits, losses, damages, claims, complaints or
demands incurred in connection with the failure by VAC to adequately perform its
technical service responsibility in accordance with the terms hereunder; which
may arise out of any claim or representation implied or made by VAC with regard
to its technical support obligations pursuant to this agreement and which may
arise out of any defect in performance or negligence by VAC as a result of the
improper performance of its
9
technical service responsibilities to NEWTECH's customers pursuant to this
agreement, excepting therefrom any damages resulting from NEWTECH's failure to
provide adequate or current technical data.
(b) Each party shall provide notice to the other party of any demand,
suit or threat of suit and shall be given the opportunity to defend same. Except
with respect to any claim, complaint, demand or litigation which one party might
institute against the other, the parties shall coordinate with each other with
regard to any claim, complaint or demand which might subsequently lead to
litigation. Each party shall be responsible to reimburse the other as a result
of any expense the other party may incur, including reasonable attorney's fees,
which may be incurred by the indemnity.
(c) The provisions of this paragraph are intended to survive the
termination of this agreement.
11. MUTUAL CONFIDENTIALITY AND NON-DISCLOSURE AGREEMENTS: NEWTECH deems
that its business dealings, customer lists and vendors' lists, parts lists and
methods of doing business are confidential and a trade secret of NEWTECH. VAC
deems the names and addresses of its service centers, its computer software
programs and business methods used in establishing its telephone network and
staffing of same are confidential and a trade secret of VAC. Each party
acknowledges that the above are valuable assets to them and that said interests
are proprietary in nature. Each party could suffer injury if its customers or
competitors were able to use the resources of VAC or NEWTECH in order to learn
confidential information. Therefore, NEWTECH agrees that if this agreement is
10
terminated, NEWTECH shall not thereafter seek to solicit, for its own use or the
use of third parties, the service of any VAC service centers that NEWTECH learns
of as a result of its association or affiliation with VAC. VAC shall not, for
its own use or third parties, use NEWTECH's customers or vendors' lists and
shall not use knowledge of NEWTECH's business dealings for the benefit of VAC or
others. The parties agree that for a period of two (2) years from the date of
the termination of this agreement, this confidentiality agreement shall remain
in full force and effect. NEWTECH shall not for itself or cause any third party
on its behalf to contact any of the VAC authorized service centers for the
purposes of establishing network or repair facilities in order to use such
facilities for warranty service repairs or extended service contract repairs.
VAC shall not use NEWTECH's customers' lists or vendors' lists to solicit
NEWTECH's customers or vendors in any way and shall not use knowledge of
NEWTECH's business dealings to its advantage. This prohibition shall not bar
NEWTECH from making legitimate inquiries to the repair and service centers with
regard to any warranty repair work that is being performed or, if a complaint
has been lodged by a customer. The parties acknowledge that it would be
difficult or impossible to ascertain damages in the event of a breach of this
clause. Thereafter, in the event either party shall breach the provisions
contained herein regarding non-solicitation and confidentiality, the parties
agree that the appropriate remedy would be for injunctive relief. The parties
agree that with respect thereto, the laws of the State of
11
New York shall be binding on the parties and the parties hereby designate the
Supreme Court of the State of New York, County of Orange as venue for any action
that may be brought for injunctive relief as a result of the breach of this
clause. The provisions contained in this clause concerning non-solicitation and
confidentiality shall not apply to those service centers that NEWTECH had
previously done business with or is affiliated with and those names are provided
by NEWTECH to VAC in order to invite service centers to become a part of the VAC
service network.
12. ADDITIONAL PROVISIONS:
(a) GENERAL LIABILITY AND PRODUCT LIABILITY INSURANCE: VAC shall name
NEWTECH as a named insured on its general liability and product liability
insurance policy with a minimum coverage amount of $1,000,000.00 per occurrence.
VAC represents that it makes an effort to have its authorized service centers
maintain product liability insurance with minimum coverage of $1,000,000.00 per
occurrence. However, because of the difficulty in enforcing and tracking this
insurance requirement from its service centers, VAC does not guaranty that its
service centers will maintain insurance in force and effect. VAC's only
representation with respect to these service centers is that it requests that
such service centers maintain the aforementioned product liability insurance,
but VAC shall not act as a guarantor that such service centers will maintain
such insurance and no liability shall attach to VAC if a service center fails to
maintain such insurance.
(b) TRADEMARKS, SERVICE MARKS, PROPRIETARY RIGHTS: Neither
12
party shall use the registered trademark, service marks, logos, names or any
other proprietary designations of the other party or any of its parents or
subsidiaries without the prior consent of the other party. Each party
acknowledges the other's proprietary interest in their work product, manuals and
trade secrets. However, each party grants the other the limited right to use
trademarks and service marks for the limited purpose of performing the functions
required hereunder. Therefore, VAC shall have the right to identify itself as a
service representative of NEWTECH when receiving telephone calls contemplated by
this agreement.
(c) WAIVER: The observation or performance of any condition or
obligation imposed on either party herein may be waived only upon the written
consent of the other party. Any such waiver shall be limited to the terms
thereof and shall not constitute a waiver of any other conduct, condition or
obligation of the parties hereunder. A failure to enforce any contract provision
contained herein shall not be deemed a waiver of the right to object to and
contest any subsequent breach.
(d) NOTIFICATIONS: All notifications pursuant to this agreement shall
be made by certified mail, return receipt requested or overnight express mail or
telefax in the following manner:
1. If to VAC SERVICE CORP. to: VAC SERVICE CORP., ▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇.▇.
▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇. Fax number (▇▇▇) ▇▇▇-▇▇▇▇.
2. If to NEWTECH APPLIANCE INC., ▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇. Fax number ▇▇▇-▇▇▇-▇▇▇▇
13
(e) INDEPENDENT CONTRACTORS: The parties agree that they are in a
position of independent contractors to one another. Nothing contained herein
shall be construed to indicate that either party legally bind the other party or
that either party has any relationship or contractual liabilities other than
those set forth in this agreement.
13. RELATIONSHIP OF PARTIES: NON-EXCLUSIVITY. This agreement is
intended to be non-exclusive. VAC may contract with any third party to offer the
same or similar services it provides to NEWTECH herein and NEWTECH shall be free
to contract with any third party in order to obtain the same or similar services
as provided for herein provided that such services do not affect the ability of
VAC to carry on its obligations in accordance with the terms of this agreement.
The parties hereby declare their relationship to each other to be that of
independent contractors and neither party shall in any way hold themselves out
to third parties as agents with authority to bind the other to any contract or
agreement except as may be specifically set forth pursuant to the terms of this
agreement.
14. TERM AND TERMINATION.
(a) This agreement shall become effective only when accepted and
executed by both parties and shall remain in force and effect for a period of
two (2) years from the date of execution. Each party may, without terminating
this agreement, serve notice prior to the end of each term of their desire to
review and modify the pricing structure set forth in this agreement. If such
14
notification is given, the pricing then in effect shall remain controlling,
subject to negotiation between the parties. If, in either parties' judgment, it
is determined that pricing is unacceptable and cannot be agreed upon, then
either party may, thereafter, give notice of termination which shall be
effective sixty (60) days after notification thereof to the other party. Other
than reservation of rights for price negotiations, this agreement shall
automatically be renewed for successive one year terms, unless one of the
parties notifies the other in writing of non-renewal prior to the expiration of
each annual term.
(b) After termination, this agreement shall remain in effect with
respect to those obligations remaining unfulfilled. Any notice of non-renewal
shall be served thirty (30) days prior to the expiration of the annual term.
(c) Notwithstanding the provisions contained above, either party may
terminate this agreement, if:
(i) the other party makes a material misrepresentation of facts in
this agreement;
(ii) the other party materially fails to perform the terms,
conditions, and obligations reserved to them pursuant to the
terms of this agreement.
15. MODIFICATIONS AND CHANGES. This agreement incorporates the entire
understanding and agreement between the parties. Any prior discussions,
conversations or agreements are merged in this
15
agreement and shall not be modified except by written instrument executed by
both parties or by the party against whom said written instrument is being
enforced.
16. WAIVER. The observation or performance of any condition or
obligation imposed by either party hereunder may be waived only upon the written
consent of the other party. Any waiver shall be limited to the terms hereof and
shall not constitute a waiver of any other condition or obligation of the
parties hereunder.
17. COUNTERPARTS. This agreement may be signed in any number of
counterparts and each such fully executed counterpart shall be deemed an
original agreement.
18. PARAGRAPH HEADINGS. The headings contained herein are for
convenience or reference purposes only and are not intended to define, limit,
expand and describe the scope or intent of any provision of this agreement.
IN WITNESS WHEREOF, the parties have executed this agreement on the
date first above written.
VAC SERVICE CORP.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
NEW M-TECH CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
---------------------------
▇▇▇▇▇▇ ▇▇▇▇▇, Vice President
Engineering & After Service
Sales
16
SCHEDULE A
PRODUCT MODEL NUMBERS AND DESCRIPTIONS
MODEL # MANUFACTURER DESCRIPTION
WT 3500 WHITE WESTINGHOUSE 5" B/W TV
WPDC1325CD WHITE WESTINGHOUSE C/D BOOM BOX DUAL CASSETTE
WVCP8000 WHITE WESTINGHOUSE VIDEO CASSETTE PLAYER
WPDC1324 WHITE WESTINGHOUSE DUAL CASSETTE BOOM BOX W/O CD
WPDC1322 WHITE WESTINGHOUSE MINI CASSETTE BOOM BOX W/O CD
WPDD1506 WHITE WESTINGHOUSE A/M F/M STEREO W/DETACHABLE
CASSETTE PLAYER
WT2520 WHITE WESTINGHOUSE 25" COLOR TV
MC3103CD WHITE WESTINGHOUSE CD A/M F/M STEREO SHELF SYSTEM
PDC325CD NEWTECH CD BOOM BOX DUAL CASSETTE
MC3103CD NEWTECH CD A/M F/M STEREO SHELF UNIT
POD506 NEWTECH A/M STEREO W/DETACHABLE CASSETTE
PLAYER
CR1244 NEWTECH CLOCK RADIO