PRODUCTION AGREEMENT
Exhibit
10.2
PRODUCTION
AGREEMENT
This
Production Agreement is made effective as of March 23, 2005 by and between
PC
Products Inc. (“PCPI”), a wholly owned subsidiary of Com-Guard, Inc., 26Zone,
Inc. (“26Zone”), a California corporation, and Wintergreen Systems, a division
of Market Development Specialists, Inc., an Indiana corporation. Com-Guard
is
the Parent Company and as it pertains to law, is a party to this
Agreement.
Wintergreen
currently is a manufacturer of finished computer goods, such as desktop
computers, notebook computers, and servers. PCPI wishes to engage Wintergreen
to
assemble computer hardware for PCPI, using parts that PCPI either supplies
to
Wintergreen or parts for which PCPI finances for purchase by Wintergreen.
In
order to assist PCPI, Wintergreen will also transfer certain inventory to
PCPI,
and also certain general intangibles to PCPI, as provided in this Agreement.
In
addition, Wintergreen will transfer certain of its sales accounts to PCPI,
for
PCPI to act as the Seller, under the terms of a Sales and Marketing Agreement
dated the same date as this Agreement (“Sales and Marketing Agreement”).
Finally, Wintergreen will also contract with PCPI for technical support and
warranty coverage for computer hardware sold pursuant to this Agreement (the
“Support and Service Agreement”). This Agreement, the Sales and Marketing
Agreement and the Support and Service Agreement (collectively, the “Transaction
Agreements”) are each inter-related, and the execution and ongoing performance
of each is a portion of the consideration for Wintergreen to enter into each
other of the Transaction Agreements.
In
consideration of the mutual promises and covenants herein, and also in
consideration of the Sales and Marketing Agreement and the Support and Service
Agreement, PCPI and Wintergreen hereby agree as follows:
| 1. |
Services
Covered by Agreement.
This Agreement concerns certain assembly and support services to
be
provided by Wintergreen to PCPI.
|
| 2. |
Purchase
and Sale of Services.
Wintergreen will assemble one hundred percent (100%) of the product
(Computer Systems) to be sold to Accounts (as defined in the Sales
and
Marketing Agreement). The timing of production and delivery of
Computer
Systems shall be acceptable to Wintergreen and PCPI according to
the
purchase orders from the transferred accounts. In addition, if
PCPI
contracts for the sale of computer hardware, which sale is not
made by
Wintergreen or one of its agents, representatives or affiliates
(an
“Outside Sale”), then Wintergreen shall have a right of first refusal to
assemble and/or manufacture the products for the Outside Sale.
The right
of first refusal shall be defined as PCPI notifying Wintergreen
in
writing, of a prospective Outside Sale, including all of the terms
and
conditions for such production, including quantity, pricing, and
delivery
information. Wintergreen shall then have ten business days from
the
receipt of the notice from PCPI in which to accept the production
of the
computer hardware for the Outside Sale (the “Option Period”). If
Wintergreen accepts the terms and conditions of the Outside Sale,
then
Wintergreen shall produce all of the products sold under that Outside
Sale. If Wintergreen fails to notify PCPI within the Option Period,
or if
Wintergreen notifies PCPI that it rejects the terms and conditions,
then
PCPI shall be entitled to have another company provide the computer
hardware for the Outside Sale, on the same terms and conditions
as
included in the notice to Wintergreen. Wintergreen shall have a
right of
first refusal on all Outside Sales, even if an Outside Sale is
an increase
in quantity from a prior Outside Sale.
|
| 3. |
Service
Prices.
Fees charged by Wintergreen to PCPI for the services provided under
this
Agreement will be as shown in Exhibit A (“Production Fees”). PCPI shall
pay Wintergreen the Production Fees within ten days of the receipt
by PCPI
of the payment for the Computer Systems, except as specifically
referenced
in Exhibit “A”.
|
| 4. |
Term.
The initial term of this Agreement shall be five (5) years from
the
signing of the Transaction Agreements. This Agreement may be terminated
only as provided in Section 10.
|
| 5. |
Computerized
Tracking of Product.
Wintergreen agrees that it shall provide a plan, no later than
45 days
from the signing of this agreement, the ability to electronically
track
the status of any product produced under this Agreement. To the
extent
that Wintergreen is required to invest in new equipment or software
for
such tracking ability, PCPI shall reimburse Wintergreen for such
expenses
within ten days of notice from Wintergreen, which notice shall
itemize all
reimbursable expenses. PCPI and Wintergreen will mutually agree
on the
amount and time frame for the monies to be
spent.
|
| 6. |
Proprietary
Rights.
PCPI undertakes and agrees to defend at PCPI’s own expense actions or
proceedings brought against Wintergreen, and any of Wintergreen’s
representatives, agents, dealers or customers (each a “Person”) for actual
or alleged infringement of any existing United States copyright,
industrial design right, trade secret, patent, or other proprietary
rights
from the Proprietary Software which was supplied by PCPI from Com-Guard
Inc. as provided herein. PCPI further agrees to pay and discharge
any and
all judgments or decrees which may be rendered in any such suit,
action or
proceeding against any Person.
|
Neither
party shall disclose, provide or otherwise make available any confidential
information concerning the products, operations, methods, processes, data,
specifications, or any other confidential, financial or business information
which it learns from the other during the course of its performance of this
Agreement. Any such information shall be subject to the same degree of security,
protection and confidentiality as the receiving party uses to preserve
information of a similar nature. No confidentiality obligations will apply
to
information which the recipient can establish is in the public domain, is
previously known to recipient without an obligation of confidentiality, is
independently developed, or is obtained from a third party that does not
have an
obligation to keep the information confidential. Provisions of this
confidentiality section shall survive termination or expiration of this
Agreement and continue for a period of five (5) years, as to all of information,
as such information remains confidential information.
| 7. |
Transfer
of Inventory and Intangibles.
Effective on the Transfer Date of this Agreement, Wintergreen shall
transfer certain inventory reviewed and approved by PCPI and 26Zone,
listed on Exhibit “B”, and also certain general intangibles, to PCPI. The
purchase price for the inventory shall be that price mutually agreed
upon
by Wintergreen, PCPI and 26Zone in their sole discretion, and shall
be no
less than Wintergreen’s acquisition cost of such inventory (“Inventory
Payment”). After mutual agreement the payment will be made within 15 days
of the agreed purchase price of the inventory. The parties shall
reflect
the Inventory Payment on Exhibit “B” when agreed upon. The intangibles
transferred by Wintergreen to PCPI shall include certain customer
accounts
currently serviced directly by Wintergreen, and also include the
ongoing
sales and service support as provided in the Sales and Marketing
Agreement
and the Service and Support Agreement attached hereto. The purchase
price
for the general intangibles shall be 3.5 million shares of CGUD
common
stock to be earned according to the “Earning of Shares” as described in
Exhibit C. PCPI will effect an S-8 Registration Statement for the
purpose
of providing registered S-8
shares to Mr. ▇▇▇▇ ▇▇▇▇ as a consultant to the company, in accordance
with
the time line as described in Exhibit
C.
|
| 8. |
Supply
of Computer Components.
PCPI shall provide at no cost to Wintergreen, or finance for Wintergreen’s
acquisition, all computer components necessary to assemble the
Computer
Systems. These components shall be acceptable to Wintergreen in
its sole
discretion. Wintergreen and PCPI agree that, to the fullest extent
possible, they shall use 26Zone to supply computer components for
the
production of the computer systems contemplated under this Agreement.
26Zone agrees to use its best efforts to provide quality components
in a
timely fashion, as specified by Wintergreen. PCPI anticipates that
it will
continue to provide the financing or direct provision of computer
components as necessary to support the production of the Computer
Systems,
as long as practicable.
|
| 9. |
Provisions
applicable to Com-Guard. Com-Guard
is the Parent Company and as it pertains to law is a party to this
Agreement. In addition, Com-Guard agrees to vote the stock of PCPI
such
that the directors of PCPI elect ▇▇▇▇ ▇▇▇▇, or such other individual(s)
as
identified by Wintergreen, to hold offices which constitute no
less than
one-half of the officers of PCPI, unless Wintergreen waives this
voting
requirement in writing. The officers of PCPI which are identified
by
Wintergreen shall have management and other responsibilities similar
to or
greater than those officers elected by PCPI which are not
identified
|
| 10. |
Termination.
Wintergreen or PCPI may terminate this Agreement, in the
event:
|
| a. |
Insolvency
- the other party shall become insolvent or otherwise generally
be unable
to pay debts as they come due, or make a general assignment for
the
benefit of creditors.
|
| b. |
Bankruptcy
- A petition under any bankruptcy act or similar statute is filed
by a
creditor of the other party or by the other party and is not vacated
within ten (10) days through court
order.
|
| c. |
Failure
to Perform - Wintergreen or PCPI fails to perform according to
the Transaction
Agreements as previously agreed upon. There shall be a 30 day notice
period in writing and a 30 day cure period for any breach.
|
| d. |
Other
breach - Wintergreen or PCPI may terminate this Agreement if any
other
Transaction Agreement is terminated for any
reason.
|
| 11. |
Shipping
Instructions.
Orders
will be placed using shipping instructions as mutually agreed upon
by PCPI
and Wintergreen.
|
| 12. |
Force
Majeure.
Neither PCPI nor Wintergreen shall be liable to the other for any
delay in
or failure of performance of their respective obligations hereunder
if
such performance is rendered impossible or impracticable by reason
of
fire, explosion, earthquake, drought, embargo, war, riot, act of
God or of
public enemy, an act of governmental authority, agency or entity,
or any
other similar contingency, delay, failure or cause, beyond the
reasonable
control of the party whose performance is affected, irrespective
of
whether such contingency is specified herein or is presently occurring
or
anticipated by either party. In the event either party is prevented
from
fulfilling its obligations under this Agreement because of such
a force
majeure as described herein, both Wintergreen and PCPI shall make
every
effort to continue to maintain as much as possible the supplier-customer
relationship established under this Agreement. However, if PCPI
or
Wintergreen is unable to meet its obligations hereunder because
of the
conditions described above, then this Agreement shall be extended
by such
time period as such conditions exist. As an example, if a condition
of
force majeure exists for 10 weeks, this Agreement shall be extended
by ten
weeks and all applicable dates in this Agreement shall be extended
by ten
weeks. No provision of this Section shall be construed to excuse
PCPI from
payment of amounts owed Wintergreen under this Agreement.
|
| 13. |
Assignment.
This Agreement is not assignable without the written consent of
the other
party.
|
| 14. |
Entire
Agreement.
This Agreement, the Sales Agreement and the Service Agreement and
the
terms and conditions referenced in any purchase order issued by
PCPI in
connection with this Agreement (to the extent not inconsistent
in whole or
in part with this Agreement) constitute the entire agreement and
understanding between the parties with respect to the subject matters
herein and therein, and supersede and replace any and all prior
agreements
and understandings, whether oral or written, between them with
respect to
such matters. Both parties agree that the terms and conditions
of any
Wintergreen or PCPI quotation, offer, acknowledgment or similar
document,
however designated, shall not
apply.
|
| 15. |
Waiver.
The provisions of this Agreement may be waived, altered, amended,
or
repealed in whole or in part only upon the written consent of PCPI
and
Wintergreen. The waiver by either party of any breach of this Agreement
shall not be deemed or construed as a waiver of any other breach,
whether
prior, subsequent or contemporaneous, of this
Agreement.
|
| 16. |
Severability.
Invalidation of any of the provisions contained herein, or the
application
of such invalidation thereof to any person, by legislation, judgment
or
court order shall in no way affect any of the other provisions
hereof or
the application thereof to any other person, and the same shall
remain in
full force and effect, unless enforcement as so modified would
be
unreasonable or grossly inequitable under all the circumstances
or would
frustrate the purposes hereof.
|
| 17. |
Counterparts.
Section headings contained herein are for ease of reference only
and shall
not be given substantive effect. This Agreement may be signed in
one or
more counterparts, each to be effective as an
original.
|
| 18. |
Arbitration.
In
the event of a dispute arising under this Agreement, such dispute
shall be
resolved by binding arbitration through submission of the issue
to a
member of the American Arbitration Association who is chosen by
mutual
agreement of the parties. If mutual agreement cannot be reached,
then each
party shall select an arbitrator, and those arbitrators shall select
another arbitrator to act as arbitrator for the dispute. Arbitration
shall
be held in a mutually agreed upon location; if no location shall
be agreed
upon, then arbitration shall be in the venue where the wronging
party
resides. Expenses of the Arbitration shall be paid as
decided
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1
FINAL
PC
Products Inc. and Wintergreen Systems Production
Contract
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
by
their duly authorized representatives as of the date first set forth
above.
|
PC
Products, Inc.
|
Wintergreen Systems, by its parent, Market Development Specialists, Inc. |
| ("PCPI") | ("Wintergreen") |
| By: | By: |
| Name: | Name: |
| Title: | Title: |
26
Zone
(“26
Zone”)
By: ____________
Name:
______________________________
Title:
_______________________________
2
FINAL PC Products Inc. and Wintergreen
Systems Production Contract
EXHIBIT
A
(Fees)
Gross
Profit- for purpose of this Agreement and the Transaction Agreements, Gross
Profit will be defined as the difference between Sales Price and the ▇▇▇▇
of
Material cost of the product (inclusive of freight, insurance , financing
fees
and license fees) without any other cost added.
Wintergreen
shall receive 20% of the Gross profit for the Production portion of the
Transaction Agreements.
Notwithstanding
the foregoing, for the first 60 days following the Transfer Date, or until
10,000 Computer Systems have been assembled by Wintergreen, whichever occurs
first, PCPI shall pay to Wintergreen, upon order of Computer Systems, an
amount
equal to Ten Dollars ($10) for each Computer System ordered (“Advance Payment”).
The Advance Payments shall be deducted from the initial Gross Profit amounts
payable to Wintergreen.
3
EXHIBIT
B
Listing
of Inventory to be sold:
To
be
supplied in a later date.
4
EXHIBIT
C
Earning
of 3,500,000
Shares
Milestone
1. within 30 days of Transfer Date 1 million shares
Milestone
2. 625,000
shares no later than 90 days after Transfer Date
Milestone
3. 625,000 shares no later than180 days after Transfer Date
Milestone
4. 625,000 shares no later than 270 days after Transfer Date
Milestone
5. 625,000 shares
360 days after Transfer
Date
SBDS02
DANDERSON 314128v3
5